U.S., EU trade heads talk regulatory differences

The top U.S. trade official expressed optimism Monday that the European Union and the United States can overcome the single biggest obstacle to free trade: their different takes on regulation.

“Over decades, the differences in our regulatory and standards approaches have created unnecessary barriers — raising costs, deterring trade and investment and negatively impacting our competitiveness and our consumers,” U.S. Trade Representative Michael Froman said in a speech at the German Marshall Fund in Brussels, a key stop on his two-day swing through Europe.

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U.S. businesses see enormous opportunities to spend less on product development and increase exports across the Atlantic through the Transatlantic Trade and Investment Partnership, which could create 740,000 jobs in the United States, according to a U.S. International Trade Commission report last week. U.S. business leaders worry, however, that they could face tough new regulatory standards as a result of concessions by negotiators.

European Union Trade Commissioner Karel De Gucht, who met with Froman on Monday, said afterward that he would like to see a set of “horizontal rules” guide regulatory cooperation.

“And what I mean by that is we should ultimately strive for the mutual recognition of our regulations across a broad range of sectors,” De Gucht said. “In my mind, this is the most efficient way to connect our two systems to allow our businesses to operate more effectively across the Atlantic.”

Their comments signal the growing momentum behind the talks, which started this summer but otherwise offered few details on just how negotiators will sync their often disparate standards in areas such as food safety, biotechnology and automotive safety and emissions. While the U.S. regulatory regime typically depends on cost-benefit analyses, the EU commonly takes precautionary measures to protect against health, environmental and consumer risks.

Froman characterized the common notions about U.S. and EU regulatory differences as “largely anachronistic” and “a caricature,” although he did not downplay the significance of needing to come together on a set of rules.

Regulatory differences presented “the greatest potential impediment to further integration of the world’s two largest markets,” Froman said. “These differences in our approach to regulation and standards have also inhibited our ability to present a shared vision to other countries and to agree on global rules.”

U.S. and European Union negotiators are already split on how to handle financial services. During his speech, Froman said the sector should be addressed “parallel” to the negotiations, not as a part of those talks. That puts him at odds with European Commission Vice President Joaquin Almunia, who said last week that it is vital to include financial services in the deal.

Critics of the proposed trade deal doubt the job-creation claims of advocates and say the pact will probably result in weaker regulations across the board.

“The core premise of these studies is the unproven business mantra that rolling back Wall Street reforms, food health standards and medicine safety regulations will somehow deliver economic gains to us all,” said the Washington-based group Public Citizen, which opposes the trade pacts being negotiated by President Barack Obama’s administration. “The main contribution of the recent flurry of studies is the addition of extra gloss and fancy printing to the old, debunked assumption that such an assault on consumers, workers and the environment would have zero costs.”